1978 (12) TMI 96 - AT - Income Tax

Summary

Issues:
- Appeal by the assessee regarding deduction of urban land tax paid.
- Appeal by the Revenue regarding expenditure on light refreshment and legal charges.

Analysis:
1. The appeal by the assessee revolves around the deduction of urban land tax paid. The assessee sold land and machinery to a partnership firm, with the firm later paying urban land tax on the land previously owned by the assessee. The assessee claimed deduction for this tax paid, arguing it was incurred for business purposes. The tribunal agreed with the assessee, citing the Supreme Court judgment in Indian Aluminium Co. Ltd. vs. CIT, stating that the expenditure was admissible as it was incurred by the assessee for the purpose of business as an owner-cum-trader.

2. In the appeal by the Revenue, the first issue concerns the allowance of expenditure on light refreshment by the AAC. The Revenue contended that the expenditure on light refreshment should be considered entertainment expenditure. However, the tribunal disagreed, following the decisions of the Gujarat High Court and holding that such expenditure for customary courtesy does not qualify as entertainment expenditure. The appeal by the Revenue on this point was dismissed.

3. The second issue in the Revenue's appeal pertains to legal charges incurred by the assessee for transferring a bus route permit. The Revenue argued that these legal charges were for a non-business purpose. However, the tribunal upheld the AAC's decision, stating that as the assessee was a motor transport operator, the expenditure incurred for transferring route permits was an admissible deduction. Citing the decision of the Madras High Court and the Supreme Court judgment in Indian Aluminium Co. Ltd. vs. CIT, the tribunal found the legal charges to be incurred in connection with the business of the assessee, thereby allowing them as revenue expenditure.

4. Consequently, the tribunal allowed the appeal of the assessee regarding the deduction of urban land tax paid and dismissed the appeal of the Revenue concerning expenditure on light refreshment and legal charges.